Just OK Isn't Good Enough (Except Sometimes...Maybe) – Adoption of Responsible Governance Policy
Has your association adopted all of the nine responsible governance policies required by Colorado law? If so, do these policies meet the legal requirements of Colorado law and your other governing documents? For many associations, the answer depends on whether the association is required to strictly comply or just substantially comply. Turns out, associations are likely required to strictly comply. Of course, the law, being what it is, appears to have some exceptions.
Colorado law (i.e. Colorado Common Interest Ownership Act or “CCIOA” for short) requires all associations to adopt the following nine responsible governance policies(1):
Adoption and Amendment of Policies, Procedures, and Rules Policy
Alternative Dispute Resolution Policy
Conduct of Meetings Policy
Covenant Enforcement Procedure Policy
Director Conflict of Interest Policy
Investment of Reserve Funds Policy
Records Inspection Policy
Reserve Studies Policy
For the most part, CCIOA is silent on the consequences if as association does not have these policies or the policies are not legally sufficient. There are two important exceptions: the Collection Policy and the Covenant Enforcement Procedure Policy. If an association has not adopted a Collection Policy that satisfies the requirements of CCIOA, the association “may not use a collection agency or take legal action to collect unpaid assessments.”(2) Obviously, it is critically important that an association be able to take legal action if an owner does not pay assessments.
If an association has not adopted a Covenant Enforcement Procedure Policy “governing the imposition of fines” that satisfies the requirements of CCIOA, “the association may not fine any unit owner for an alleged violation.”(3) Given that fines are often the most effective way to get owners to cure violations, losing the ability to fine can be very harmful to an association.
Beyond these specific consequences, there is good reason to believe that associations must strictly comply with the requirements for the other responsible governance policies. Recently, a decision of the Colorado Supreme Court went out of its way to note that the Colorado Supreme Court “has never held that any of CCIOA’s provisions may be satisfied through substantial compliance.”(4) This opens the door to an interpretation that CCIOA’s provisions, including those requiring adoption of responsible governance policies, might only be satisfied through strict compliance. This is important because strict compliance leaves no margin for error whereas substantial compliance requires a significant level of conformity but allows for minor deficiencies. Given this uncertainty, a cautious approach would be to assume that adoption of the responsible governance policies requires strict compliance.
Written by: Christian Webert, Moeller Graf
Note: Our new Essentials subscription service covers a review of an associations 9 policies. See the plans for more information and sign up today to receive this benefit immediately!
C.R.S. § 38-33.3-209.5(1)(b)
C.R.S. § 38-33.3-209.5(5)(a)
C.R.S. § 38-33.3-209.5(2)
Perfect Place, LLC v. Semler, 426 P.3d 325 (Colo. 2018)